Tuesday Closing Livestock Market Summary - Cattle Gains Hold Late

GENERAL COMMENTS:

Optimism was seen across livestock trade Tuesday afternoon with all markets posting triple-digit gains at one point or another during the session. The ability of live cattle futures to hang onto gains helped to stimulate additional buying across the complex at the end of the day. Cash cattle activity remains at a standstill with no evidence of packers showing bids at this point. The recent sharp gains in boxed beef values should push the limits of plant production and stimulate additional cash buying. So far, asking prices are holding at $109 per cwt in the South and $178 in the North, but only a few bids have been reported by Tuesday afternoon with many other feedlot managers waiting to see what shakes out from the recent futures market rally. Active trade is expected to be delayed until the second half of the week, potentially until Friday. The National Daily Direct afternoon hog report was $0.60 lower ($58 to $72.50, weighted average $69.18) on 14,715 head sold. Corn futures continued to weaken on ideas that production may not be as weak as previously thought. September corn closed 5 1/2 cents lower. Stock markets were lower in light trade with the Dow 106 points lower and the NASDAQ down 39 points.

LIVE CATTLE: Futures closed $0.25 to $1.60 higher. Live cattle futures were not only able to bring buyers to the table early Tuesday, but for the first time since early July, nearby futures posted triple-digit gains at closing bell. Tuesday's $1.77-per-cwt rally in October futures was the largest one-day gain since July 9, when the contract rallied $1.90 per cwt. Although the complex remains under significant pressure following last week's losses and uncertainty over beef plants' ability or desire to increase output over the next several weeks, traders are backing away from long-term support levels. The October contract closed at $100 per cwt, the highest price in the last week. The ability to move contracts to a triple-digit price had become more of a psychological barrier than a technical roadblock to this point. Traders will closely monitor initial trade Wednesday morning, as the ability to hang onto recent gains will be a huge factor in sparking additional buyer support. Beef cut-outs: mixed, down $0.25 (select, $214.27) to up $2.57 (choice, $241.70) with good demand and moderate offerings, 94 loads (41 loads of choice cuts, 26 loads of select cuts, 12 loads of trimmings, 14 loads of coarse grinds).

WEDNESDAY'S CASH CATTLE CALL: Steady to higher. Strong futures gains and firming beef values would likely point to cash market firmness. But packer interest so far this week has been silent, creating expectations that any business will be delayed until late in the week.

FEEDER CATTLE: Futures closed $0.12 lower to $0.90 higher. Limited support held late Tuesday following strong early gains. But even though pressure was seen in corn trade, early buyer support couldn't be sustained and traders backpedaled from morning gains. Compared to the live cattle complex, feeder cattle have seen a significantly better recovery from last week's losses. But prices remain $3 per cwt below levels seen before the Tyson plant fire. Gains over the near future may be more difficult to achieve as traders remain concerned about large feeder cattle numbers moving into the system the rest of summer. Early estimates for Friday's Cattle on Feed report show generally steady placement numbers in July. This could help stabilize the market, but is unlikely to lead to active support. CME cash feeder index for 8/16 is unavailable at this time.

LEAN HOGS: Futures closed $0.22 to $1.32 higher. Traders swiftly moved into nearby lean hog futures trade Tuesday morning, expanding on early week gains. Though it is still too early to consider this two-day move a break from the previous sell-off, the ability of futures to hold onto gains through closing bell is helping build confidence through the complex. The December contract led the complex higher, closing up $1.35 per cwt. Spot October was up 95 cents, closing just shy of $65 per cwt. With long-term support now set at $62 per cwt, traders would feel much more comfortable with a wider cushion over the next couple of days. The inability to hold these prices through the rest of the week would lead to concerns of continued market weakness. Pork cutouts continued to tumble lower on triple-digit losses in picnic and ham cuts. Pork cutout values fell $1.07 per cwt, moving to $83.91 per cwt on 426 loads. CME cash lean index for 8/16 is $78.55, down $0.47. DTN Projected lean index for 8/17 is $79.99, down $0.56.

WEDNESDAY'S CASH HOG CALL: Steady to $1 lower. Little change is expected in cash hog trade midweek with packers expected to float early bids steady to $1 per cwt lower in order to continue to gain enough hogs to meet the aggressive plant throughput. Most bids are expected to be steady to weak given the amount of hogs available throughout the country. Wednesday slaughter numbers are expected at 479,000 head. Saturday runs are expected at 128,000 head.

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